BANKS’ incomes remained largely in line with last year’s numbers despite a huge outcry over a memorandum of understanding (MoU) financial institutions signed with the Reserve Bank of Zimbabwe (RBZ) cutting fees and commissions.
The decision by the central bank to compel banks to lower fees and commissions came amid concerns financial institutions were making the bulk of their profits from non-core activities and levying service charges to depositors.
A quick look at the interim financial results to June that have come to the market so far shows that bank incomes remained largely in line with last year’s figures, while in some instances there was marginal growth.
FBCH interest income of US$9,8 million was largely in line with last year’s US$9,3 million, while net fee and commission income increased marginally in the six months to June from US$11,2 million to US$11,4 million in the same period last year.
POSB’s income also remained largely in line with the previous year. Net interest income was at US$3,1 million from US$3,2 million in the comparative period last year, while fees and commissions income was US$7,1 million from US$7,7 million, reflecting a marginal drop.
CBZ, the largest bank by deposits, realised US$43 million in interest income from US$41 million last year in the same period and non-interest income of US$21 million from US$20 million.
African Banking Corporation (ABCH)’s non-interest income of BWP371million was 58% ahead of BWP235 million achieved in 2012. Growth in non-interest income was underpinned by an increase in transaction volumes across all subsidiaries.
BancABC Zambia had the largest growth on the back of an increase in customer numbers in consumer lending as well as increased bond trading income.
BancABC Zambia’s profit rose from BWP6 million in 2011 to BWP17 million on the back of increased consumer lending and non-funded income — commissions and fees.
The group’s fees and commissions were higher on account of an increase in business volumes in both BancABC Botswana and BancABC Zimbabwe. This income line was also boosted by a BWP54 million mark-to-market gain in equity investments during the period.
This comes as banks warned they stood to collectively lose US$73 million annually as a result of the MoU between Bankers Association of Zimbabwe and the RBZ which slashed bank charges and transaction fees from January 2013.
Non-interest income was BWP28 million. The group said it was optimistic about the Tanzanian operation after it obtained a government payroll deduction code, which positions the business well for the future.
The group said it took the decision to split income earned on consumer loans between interest income and loan management fees. The move was necessitated by the need to properly price its loan book and related services.
“This led to a reduction of 11% in net interest from BWP38 million to BWP34 million in the current period. However, this was more than compensated for by the 346% increase in non-interest income from a combination of the increased loan management fees on consumer loans coupled with increased trade finance transaction fees,” the group said.
In the period under review, ZB reported a US$2,6 million profit, a figure representing a 168% growth from last year.
This was despite mounting pressure on operating costs which increased by 10% from US$27,4 million in 2012 to US$30 million in 2013, achieving a cost efficiency ratio of 83%, an improvement from the 91% achieved in the corresponding period.
Total income for the period went up 20% on prior year to US$36,2 million despite a reduction in net interest income of 6%.
Net interest income slid to US$10, 6 million from US$11, 6 million prior year after an increase in interest expenses to US$7, 1 million, up from US$6, 7 million in the first half of 2012.
ZB said the net charge to the income statement for loan loss provisions amounted to US$0, 6 million down from US$2, 3 million prior period.
FBC Holdings Ltd reported a solid profit in the first half of the year to June buoyed by solid performance of its banking, building society and key subsidiaries.
The group’s profit during the six months to June of 2013 reached US$10 million, representing 59% of total profits for all of 2012.
Flagship FBC Bank’s cost to income ratio dropped from 75 to 73% .
Basic earnings per share rose from 1,06 US cents to 1,31 US cents from the same period last year.
The improvement in the cost-to-income ratio was due in part to the group’s ability to maintain operating expenses in line with inflation, while also decreasing staff costs through a rise in automation and electronic transactions.
Management said e-commerce would continue to be a primary focus for the group as banking makes its transition into the future.
Although other banks have not yet come to the market, indications judging by the figures released so far show that banks are still making a bit more of their incomes from non-funded activities.